After trading blows with DraftKings, Fanatics again looks poised to become the newest Illinois sportsbook operator.
Fanatics, an upstart sports betting outfit, has been battling with DraftKings over PointsBet’s US assets. That includes the Prairie State, where PointsBet is one of seven legal, regulated Illinois sportsbooks.
On Tuesday, Fanatics increased its original offer from $150 million to $225 million to acquire PointsBet US.
Sports betting giant DraftKings jumped into the mix about a month after Fanatics made its original offer. However, after Fanatics’ counter-punch, DraftKings has chosen to drop its bid to buy PointsBet’s US business.
If the deal goes through, it will give Fanatics access to 15 US states that PointsBet operates in, including Illinois. That could be big in Illinois considering the limited options for sports betting. It would make Fanatics the newest Illinois sportsbook.
Fanatics-PointsBet deal could be huge for Illinois sports betting
In an effort to boost its presence in sports gambling, Fanatics increased its offer to by PointsBet‘s US assets by 50% in order to outbid DraftKings. The $225 million offer is $75 million more than Fanatics’ previous bid and $30 million more than DraftKings final offer of $195 million.
PointsBet’s board unanimously approved and recommended the new proposal from Fanatics and will vote on it Thursday night. PointsBet chairman Brett Paton said Fanatics handled itself well during negotiations and offered an unbeatable price.
“The Board unanimously supports the improved proposal from Fanatics Betting and Gaming, which provides a superior price plus certainty,” said Paton. “Fanatics Betting and Gaming conducted their diligence process and negotiations in a highly professional manner at all times. Our US team will have a strong future as part of the Fanatics Betting and Gaming group.”
The sale needs to get shareholder and regulatory approval before it is complete. This news is huge for the Illinois sports betting scene. In a market with only seven online sportsbooks operating, DraftKings has now failed to take out a competitor.
Buying PointBet’s US business will instantly make Fanatics the fourth-biggest Illinois sportsbook operator in the country’s second-most lucrative sports betting market. As of this past April’s revenue report, PointsBet has taken in over $1.6 billion in lifetime sports bets in Illinois, generating over $124 million in revenue.
However, DraftKings does hold the top spot in Illinois in terms of total bets (DK is second to FanDuel in revenue). In fact, DraftKings is doing well in pretty much every state it operates in. So, was this push to buy PointsBet’s US business legit, or was it a strategy?
DraftKings drives up the price for Fanatics
If DraftKings goal was to drive up the price for Fanatics to acquire PointsBet’s US assets, mission accomplished. PointsBet gave DraftKings time to submit a binding offer, but the operator wasn’t able to meet the deadline.
But did DraftKings ever intend to turn in another offer? Paton says PointsBet made it clear that in order for the company to take the deal seriously, DraftKings needed to commit to the sale even if regulators did not approve the potential merger.
So was DraftKings sole intention to put up a roadblock? Fanatics CEO Michael Rubin thinks so. He previously said he thought DraftKings was trying to throw a wrench in Fanatics’ momentum.
“We are skeptical of the DraftKings proposal which seems like a desperate move to slow down Fanatics and PointsBet from completing the deal,” said Rubin.
Bad blood between Fanatics and DraftKings
The two sports betting rivals do have a history together, and PointsBet may have become the beneficiary of a past feud between two CEOs.
According to a New York Post report, the pitch to purchase PointsBet’s US assets by DraftKings CEO Jason Robins directly results from a failed 2021 merger between DraftKings and Fanatics. According to a source, Robins holds a grudge against Rubin after Rubin allegedly walked away from the merger. The merger would have been a 50/50 split, with each company valued at $24 billion.
The Post wrote that the source claimed that Rubin walked away near the end of the process. After the merger fell through, DraftKings saw its shares drop by more than half, leaving the company valued at $11.5 billion. The source claims that Robins has held onto that grudge ever since.
A DraftKings spokesperson said that any suggestion that there is an ulterior motive behind the bid that is personal and not business related is irresponsible and not grounded in reality.
One could still argue that the bid was a strategy by DraftKings to slow down Fanatics from expanding its sports betting market and blocking the company from entering major sports betting markets like Illinois.
The entire situation is built for an HBO drama series.